County eyes solutions for shortfall in revenue

FRONT ROYAL — Warren County leaders might need to cut spending or raise taxes to plug a $3.5 million hole in next year’s budget.

The Board of Supervisors learned about the projected revenue shortfall at its work session on the fiscal 2016 budget on Tuesday. County Administrator Douglas Stanley presented early estimates to the board.

The proposed budgets for all county departments, excluding the schools, total $48.19 million. Adding the school’s local appropriation in this fiscal period of $21.1 million, the county would need $69.29 million in the budget’s general fund. The county faces a $3.48 million shortfall if the board lowers the tax rate to reflect the higher property values in the recent reassessment.

Stanley suggested one option – set the tax rate at a level that would generate more revenue for the county and help close the gap. This year, that could mean leaving the rate at 61 cents per $100 of assessed value because property values increased on average overall. The extra revenue generated could help fund pay raises for county and school system workers or other needs.

The fiscal 2015 budget of $95.49 million includes $51.53 million for the school system, $21.1 million of which comes from local funding. Revenue in the general fund amounts to $65.06 million in the budget.

The numbers reflect that the School Board would ask for the same amount of local funding that it received in the fiscal 2015 budget.

“I’ll say this: It’s a big number. From the standpoint of staff, each department head, constitutional officers, did a good job of keeping their numbers in their respective budgets down,” Stanley told the board.

Board Chairman Richard Traczyk called the shortfall the “disaster number.”

“There’s no good news in this thing,” Traczyk said.

The board will need to make many cuts reduce the shortfall.

“I’ll say this: We’ve been there before,” Stanley said.

Supervisor Tony Carter echoed Stanley, noting that at this stage of the budget discussions the board has had to deal with a shortfall.

The board increased the real estate tax rate by 1 cent last year to generate money to help cover the local share of the cost to run the Rappahannock-Shenandoah-Warren Regional Jail. The county began setting aside money for that purpose several years ago to give the board a cushion, Stanley said.

The news comes as the county also saw the average real estate value increase 5.86 percent since the last reassessment conducted about four years ago. The county charges 61 cents per $100 of the assessed value for real estate. The county would need to lower the rate to 58 cents per $100 of assessed value to equalize the levy. Any rate over the equalized levy could generate extra revenue but also must be declared a tax increase. The county collects about $400,000 for every cent on the real estate tax rate at the 61-cent levy.

Increasing the rate to pay for salary increases would not help fill the gap because neither of those items are in the proposed budget, Stanley explained.

“We try to make decisions that lessen the impact down the road if we can,” Stanley said. “Sometimes, politically, we can’t do that.

“The first thing is you’ve got to close the budget gap,” Stanley added. “Now we’re still trying to look forward to what happens next year.”

Supervisor Daniel Murray Jr. pointed out the benefit of having the Dominion power plant in the county.

“It shows how important it is to have a Disney World right down the road from my house,” Murray said. “It’s the gold mine.”

The county collected $3.18 million in the public service corporation taxes from the plant in fiscal 2014 — an amount determined by the State Corporation Commission’s assessment. The county can expect to collect an estimated $4 million this fiscal year and $5.84 million in fiscal 2016 from Dominion. But the revenue is usually accounted for in the county budgets.

The $5.84 million in the next period likely will go to cover costs for the second middle school, the regional jail, spending in the general fund and to help offset a projected $1.16 million loss in funding as a result of an increase in the county’s ability to pay for education, known as the composite index. As Stanley explained, the county likely can expect to see its ranking on the composite index rise and, in turn, lose close to 20 percent of the state funding it receives from the state to cover certain education costs.

Contact staff writer Alex Bridges at 540-465-5137 ext. 125, or abridges@nvdaily.com